Working at a hospital is very political -- PDs get to where they are because they know how to work the politics and keep their Chirmn/Deans/administrators/trustees happy. It has less to do with competence or logic. And nobody outside of the PDs office ever sees the Step 1 scores. (I'm going to ignore your extremes because few PDs are ever actually are forced to decide between an AMG who failed versus an IMG with 260. Most of the time it's more like an AMG with 200 versus an IMG with 230. And it's rarely a one dimensional binary analysis based just on Step 1 scores, which, while used as an initial hurdle, are universally agreed not to be a useful measure of how good a resident someone will be). And yes the AMG will win these analysis, even if his stats are lower, because when the PD shows his list of residents to his bosses, and he will, they don't include these stats, just where they graduated from. The guy from U of State X looks better than the guy from some program the Chairman has never heard of. I think you are imagining a situation where the PD has unfettered authority to do whatever he wants without any bosses input or oversight, but those situations tend not to exist. He may have a long, sometimes imperceptible leash, but it's still there and if the PD objectively doesn't do a good job, and cow tow to the politicos, the leash tightens and the department head will give the job to someone else.
As I've stated in other threads, the analysis has little to do with quality. Rather it's about brand. In the US the AMGs are the trusted brand. The LCME ensures this by making US grads and schools jump through various hoops. Foreign grads, though they may have better stats don't come with this warranty. When you go to Best Buy to get a new TV, you might narrow your choices down to a Sony or some brand you never heard of that seems to have more bells and whistles for the same price. Guess what -- most people are still going to buy the Sony. Doesn't matter if it's the best or the best deal. You've heard of it. You know at you are getting. And this is the hurdle all IMG/FMGs face. Nobody cares if you have better Step 1 scores. PDs want to be able to hand a list of matched residents and their med schools to their bosses with lots of Sonys. That's how they keep their bosses happy. That's how they stay on the long leash. And in the end that's a more important motivator to them than offering a helping hand to someone outside this increasingly closed system.